Prajna Capital - An Investment Guide

IN an age when shares can be purchased at the click of a mouse, filling a life insurance proposal continues to be a major chore. More often that not it is the insurance agent who, in his eagerness to sell, fills in the details on behalf of the insured. What the proposer doesn’t realise is that such a casual approach can make a crucial difference when it comes to pricing, and in ensuring that claims are not prejudiced. Unlike other transactions, insurance is based on faith. Since the insurance company cannot verify every bit of information, it accepts in good faith whatever details the proposer provides. The flip side is that this gives the company the right to reject claims if there is non-disclosure of a fact that is material to the pricing of premium. If there is a vague or incomplete entry in the proposal, the underwriter may play it safe and bracket the insured in a higher risk category. This is more applicable in case of policies where there is a high sum insured. Tak...

This article explains the basic concept of a child plan, as is available in the market today. What is a Child Plan? It has typically two components to it: A life insurance on the parent An investment vehicle that accumulates your savings on a regular basis and pays it back around the time the child reaches college (typically when he/she turns 18-21) These two components are thus very different in what they achieve to secure the child’s future, and any analysis must keep this distinction in mind at all times. The Insurance Component Life insurance in the child plan ensures that the monies payable to the child for higher education are protected against untimely death of the earning parent. I cannot overplay the importance of this insurance – in fact, my observation has been that most people underinsure their life in these policies. By mandate, the minimum life cover that you have to opt for in a child plan is Sum Assured = Term * Annual premium / 2 Thus, if you take an 18-year plan, p...